A journal of politics, current events and opinion.

07/30/2012

Salazar v. Ramah Navajo Chapter

[We did a short blog last week about Justice Roberts’ position on the new healthcare statute. Our point was that he seemed consistent in his legal conservatism, even though he voted to uphold that particular law. He applied well recognized standards of “judicial restraint” in arriving at a position, and voted consistently with them. The fact that Movement Conservatives were outraged at the result was not relevant. They’re not interested in the law, only in results, and they will do everything necessary to arrive at where they want to be.

We also believe that not every Supreme Court decision can be predicted, or should be explained by a simplistic left/right analysis. This is especially true when the definition of what’s authentically left, or right, changes from day to day depending upon political expedience. Really some of these media analysts, and pundits, are ridiculous.

So we thought it might be useful to follow up with an example, say of a recent decision where left/right distinctions were meaningless. But I for one didn’t know of one offhand, so I called on our friend Larry for some help.]

“Thanks,” said Larry, “I do have a case which could be important for the future and, mercifully, has nothing to do with healthcare. Also, it was decided on a 5/4 basis, but with an interesting mix of judges on either side.”

“Fine,” I said, “We need a change of pace. What’s the decision and why is it important?”

“I’m talking about Salazar v. Ramah Navajo Chapter[1], and the issue is whether, and under what circumstances, the Government can reduce payments under its contracts due to lack of funds. You may think that this kind of issue should have no political importance at all, and right now most people seem to agree. That’s obvious from the utter lack of media attention to this case. But, for reasons I’ll explain later, this issue could be a political hot potato next year.”

“OK,” I said. “You hear a lot these days about city governments discontinuing payments on their debts. Typically this happens because the city doesn’t have the revenue to support its obligations. Butthose guys usually are fixing to go into bankruptcy. You mean the feds can disavow their debts also? I thought our Constitution prohibited that kind of thing.”

“Not exactly. The Constitution does prohibit laws that ‘impair the obligation of contracts.’[2]But that applies only to the states and state legislation, not federal laws. And, of course, there are exceptions even for the states.[3]”

“You mean there’s nothing to stop the Congress from passing a law that voids or radically limits the rights of parties to contracts? Surely the Congress has been tempted to do this from time to time?”

“I suppose. And if it did happen, undoubtedly the affected contractors – at least the big ones - would sue. One approach might be to invoke the 5th Amendment, i.e., to allege that the Government haddeprived them of their property without due process of law.[4] No doubt there are other arguments that could be made as well.[5] But that’s not the situation we have here.”

“OK, I guess we’re getting ahead of ourselves. Let’s back up for a bit. What happened between the Interior Department and the Tribes?”

“The Indian Self-Determination Act[6] directs the Interior Department to contract with ‘willing tribes’ to provide education and law enforcement services to tribes that the Department would otherwise perform. These were called ‘self-determination’ contracts, and were subject to two important limitations: (1) the Government had to agree to pay the ‘full amount’ of a tribe’s ‘contract support costs’ incurred in doing the work[7]; and (2) payments under the contracts were to be ‘subject to the availability of appropriations.[8]’”

“But Larry, you and I both have some experience with government contracts. We both know that the Government never agrees to pay all of any costs without limiting the total amount it will pay.You know, a ceiling, a ‘not to exceed” price, or something like that.[9] You have to do that so you don’t exceed your appropriations and run afoul of the Anti- Deficiency Act.[10] No bureaucrat wants to do that. Criminal sanctions are possible.[11]”

“Maybe,” said Larry, “but the Interior Department didn’t use ceilings. After all, legislatively they were required to pay the ‘full amount,’ to each contracting tribe, not a ceiling amount. But they did say that these contracts were subject to the availability of appropriations. And when they realized that their available funds were not sufficient to pay contract support costs for everybody, they took the easy way out. They paid each tribe a proportionate share of the amount it claimed.”

“And the Tribes sued for the balance of what was owed?”

“Yes, and they did so by utilizing the same remedies that any other federal contractor might. They used the Contract Disputes Act.[12] The Tribes sued for breach of contract and, more importantly, they won. The Court ruled, 5 to 4 that the Government had to pay up.”

“So what was the rationale? We’ll get into the political issues later.”

“In a nutshell, the majority said that the Interior Department was responsible for managing its own funds, not the Tribes.

… so long as Congress appropriates adequate funds to cover a prospective contract, contractors need not keep track of agencies’ shifting priorities and competing obligations; rather, they may trust that the Government will honor its contractual promises.[13]

Given that, the Government had to pay.”

“Wait a minute!” I said. “That doesn’t seem to be entirely fair. After all, the agreements at issue also said that they were ‘subject to the availability of appropriations.’ Surely that was sufficient warning to the Tribes that the Interior Department might not be able to pay everything?”

“The dissenting judges agree with you. But the majority held otherwise. They said that if the agency had enough funds available to pay some contracts when they were awarded, then ‘the Government’s promise to pay all of them was binding.’[14] Limiting words, such as ‘subject to the availability of appropriations'’ did not excuse the Interior Department from that obligation. The limitation ‘wassatisfied…because Congress appropriated adequate funds to pay in full any individual contractor,’[15] just not all of them together. The fact that the Interior Department wrote too many contracts was the Department’s problem, not the Tribes’.”

“Well, this sounds a bit mechanical to me. How is it supposed to work? Suppose an agency signs two contracts in the same hour, and either one of them could be funded out of the available appropriation, but not both. Are both contracts valid? What if the second contractor already knew that the agency’s funds were taken up by the first contract? Are both contracts still valid? What if the agency has funds to support one contract and signs ten. Are they all valid?

“Actually, I’m not sure.”

“Well, maybe the dissenters can help me understand. What did they have to say?”

“The dissenters argued that the majority had missed something. Certainly the Department’s contracting authority was ‘subject to the availability of funds.’ But the statute also provided that theDepartment had no right to make funds available to one contractor by reducing payments to others.[16] So there was no point at which the funds available were sufficient for any contract, because all contractors were entitled to part of them from the get-go.

Given this, the dissent concluded that ‘the Tribes are not entitled to payment of their contract support costs in full…[17]’”

“Larry, if the dissent is correct, possibly no contract should have been awarded to any tribe. It would have been impossible for the Government to pay any of them their full contract supportcosts. Or am I missing something?”

“G, I’m never sure what you’re missing on any given day. But both the majority and the minority relied heavily on prior case law, some of it from the old Court of Claims; and they were attempting to apply that precedent to the present situation.

Look at it this way. Perhaps both sides are using the ‘reasonable contractor’ standard here instead of a mechanical one. In a normal situation a contractor is entitled to assume that the Government knows what it’s doing when it agrees to pay for something. When the Government says that it will pay, it’s also saying that it has the authority to pay. Otherwise it would be violating the Anti-Deficiency Act.

If the Government’s obligation is expressly made ‘subject to the availability of appropriations,’ then perhaps the contractor has a duty to enquire further, to verify that the appropriation at issue is large enough to support at least one contract. But the contractor doesn’t have to go much further than that into the details of how an agency spends its money, or whether it has already spent it.

And this may be where the majority and the minority disagree. The statute also told the Government not to reduce payments owed to one tribe to pay another. All the Tribes knew, or should have known that, so to the dissenters it wasn’t reasonable for any tribe to assume it would get the full amount due under its contract.[18]

You see, both sides were looking at what was reasonable under the circumstances. They just disagreed on what that might be.”

“Nice theory, Larry; I wonder if anybody on the Court agrees with it. But let’s move on. I see another problem. Even if the Tribes had a right to be paid, how could that be done when the Interior Department had exceeded its appropriation? It had no spending authority left.”

“That’s the easy part,” he said. “As I mentioned earlier, the Tribes sued under the Contract Disputes Act. That Act provides that any judgments against the Government will be paid by a special Judgment Fund[19].”

“You mean, all the Interior Department had to do was refuse to pay the bill, lose in court, and then some other agency would pick up the tab?”

“In this case, yes. I don’t know a lot about the Judgment Fund, but apparently that’s the way it works. Payments from the Judgment Fund are managed by the Treasury Department.[20]

“One final question. Did anybody over in Interior get in trouble over these contracts? After all, they did award contracts that exceeded their available spending authority.”

“Apparently not. The bureaucrats did what their statute said. As the law required, they awarded contracts to every tribe who qualified and, also as required, promised to pay contract support costs to all of them. And when Congress failed to appropriate sufficient funds for this, they apportioned the available funds in an equitable manner. The majority said the funding problem was created on Capitol Hill and its ‘resolution is the responsibility of Congress.’[21]”

“Anyway, let’s move on to the politics of this decision. Which judges took which positions?”

“I thought the last question was your ‘final’ one. Where is this one coming from?”

“It was the final one of a previous arc of questions. Now we’re in a new arc. Don’t you know the answer?”

“Of course I do. There were liberals and conservatives on both sides. Judge Sotomayor wrote the opinion for the majority, and she was joined by Justices Scalia, Kennedy, Thomas and Kagan. TheChief Justice wrote the dissent, and he was joined by Justices Ginsburg, Breyer and Alito.”

“So, I guess it’s not clear whether this was a liberal or conservative decision. No wonder the media haven’t touched it. But what about the Movement Conservatives? How do they stand on funding issues?”

“There’s not a peep out of them so far. But, you know they are in favor of cutting programs. If they decide the best way to go is to cut Government contracts, including ones currently in force, then youcan be sure the drums will start beating. You know, identify the unworthy programs, rescind those appropriations, and cancel the contracts. Also, prohibit the Judgment Fund (or other funds) from being used to pay any damage claims or judgments that may result. And, if the courts can’t be trusted, bar them from hearing cases on government contract claims.”

“Now that would be a brouhaha! I can hardly wait.[22] And judges on the Supreme Court had better watch out! If they cross the Movement Conservatives for any reason, they’ll be defined and vilified asliberals no matter what.”

[1] 567 U.S. ___ (2012). The decision is currently available only as a slip opinion. (We’ll cite that as Salazar v. Ramah Navajo Chapter, at ___.) You can get the slip opinion –for a price- from one of the expensive legal services or you can download it for free from the Supreme Court’s web site. Go to http://www.supremecourt.gov/ and look under Recent Decisions.

[4] You can get the text of the 5th Amendment from the National Archives at the web address listed in note 11. The 5th Amendment provides, in pertinent part, that “No person shall be…deprived of life, liberty or property, without due process of law; nor shall private property be taken for public use,without just compensation.”

[5] On the other side, it’s worth noting that, in the early days of the Republic, claims against the United States were settled first by the Congress, then by the Treasury Department; not by the courts. See GAO, Principles of Federal Appropriations Law, Vol. 3 (3rd Edition, 2008) at p. 14-2 et seq. Toallow suits on these matters requires a waiver of sovereign immunity, which has been done, but logically also might be undone by legislation.

[9] Take a look at the Federal Acquisition Regulation (FAR) for some typical provisions. The FAR has its own website; you can find it at https://www.acquisition.gov/far/index.html The website keeps the regulation updated in real time. For examples of funding limitations, see FAR 16-206, Fixed-ceiling-price contacts with retroactive price determination; FAR 16-301, Cost Reimbursement Contracts.

[14] The majority cited an earlier case from the Supreme Court as authority for its position. See Salazar v. Ramah Navajo Chapter, at Sotomayor opinion, IIA, p. 5; Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631 (2005). It also referenced some cases from the old Court of Claims and, interestingly, the 2nd edition of GAO’s Principles of Federal Appropriations Law (aka, the Redbook)as persuasive. Today there’s a 3rd edition of the Redbook. Both editions are available from GAO as a free download. Go to http://www.gao.gov/legal/redbook/redbook.html

[18] This is G. Many things passed on the Hill can’t be taken at face value. A favorite drafting trick up there is to write a law that states a broad, general rule that sounds wonderful, and then eat it up with exceptions so that there’s nothing left. This would be an example of that.

[20] See GAO, Principles of Federal Appropriations Law, Vol. 3 (3rd Edition, 2008) at p. 14-9. If you want to know more, you can go to the Treasury at http://www.fms.treas.gov/judgefund/index.htmlTreasury files an annual report with Congress detailing all expenditures made. It makes for interesting reading.

[22] By the way, the idea of legislatively barring the courts from hearing certain types of cases is not farfetched. Back in the Bush Administration, the Right tried to do just that to prevent the federal courts from hearing habeas corpus petitions from prisoners at Guantanamo. And they did it even though the right to habeas corpus is specifically protected Article 1, Section 9 of our Constitution. See the blog of 09/29/2010, On Closing Guantanamo.